SMEs cut ties with foreign suppliers to safeguard supply chains: ScotPac
A quarter of Australian SMEs plan to add domestic suppliers over international suppliers in the 18 months to guard against supply chain turbulence.
Global supply chain challenges over the past three years are driving SMEs to sharpen their focus on inventory management and the use of Australian suppliers, according to findings from ScotPac’s SME Growth Index research.
Around 28 per cent of Australian SMEs plan to add new domestic suppliers in preference to international suppliers in the next 18 months to build greater supply chain resilience. This figure was even higher among smaller SMEs at 32 per cent.
The research also found that 21 per cent of SMEs plan to cut ties with international suppliers in 2023–24 to support local products, services and jobs.
Half of SMEs in the survey also said they planned to secure more flexible supply chain funding arrangements and to get closer to key suppliers and customers in order to guard against supply chain turbulence.
Other key measures for improving inventory management included focusing on key inventory items and removing others at 36 per cent, stocking up more inventory in specific areas at 26 per cent and switching from Just-in-time to Just-in-case inventory management at 22 per cent.
Disruptions and challenges like the COVID-19 pandemic, political conflicts and rising inflation have become the new normal for business owners, said ScotPac chief executive Jon Sutton.
“It is clear from the well-considered strategies SMEs have outlined in response that a growing number now view strengthening supply chain resilience as a core business planning priority, rather than a reactive event,” said Mr Sutton.
“That is also reflected in the surge in demand for ScotPac trade finance facilities in the past 12 months as SMEs have sought to increase purchasing power to support their trade needs and opportunities, both domestically and internationally.”
SME supply chain issues easing
NAB Group Economics stated that supply chain pressures were starting to ease but were still above average in its supply chain update for the first quarter of 2023.
Only 15 per cent of SMEs surveyed by NAB reported that supply chain issues were still significant for their business.
Around one in 10 said they expect supply chain issues to be a significant issue for their business over next 12 months. This was down from 18 per cent in the previous quarter.
Highly impacted firms continue to be most prevalent in wholesale trade (22 per cent), and least so in health and business services (3 per cent).
“Prior to the pandemic, supply chains were focused on getting goods as quickly and cheaply to customers as possible. This was achieved by outsourcing parts of the supply chain to cut storage overheads, manufacturers cutting back on the quantity of spare stock and delivering products ‘just in time’ to fulfil customer orders,” NAB said its update.
“The pandemic clearly highlighted the fragility of this model, adding to global shortages and inflation. As a result, there have been calls for greater diversification of supply lines and increasing domestic capabilities, particularly for essential goods such as medical supplies and equipment and chemicals but also for a range of other goods including construction materials.”
The need for businesses to remain nimble and react to unforeseen changes across the supply chain has become particularly clear since the pandemic, the major bank said.
“Strategies such as leveraging automation and analytics to better predict inventory availability, lead times and order accuracy, maintaining alternate providers/competitors, disaster-recovery plans, more frequent lines of communication with priority suppliers, sharing real-time demand signals and forecasts, collaborating on new product innovation and the use of smart sensors to detect production or delivery issues, are just some of the opportunities,” it said.
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